Claiming cryptocurrency losses for tax purposes in Germany: BMF guidance, Section 23 EStG, holding periods, staking, DeFi, and NFTs -- a guide for tax filing.
When the Crypto Market Crashes, the Tax Office Becomes Your Ally
The volatility of cryptocurrencies is legendary. Anyone who has invested in Bitcoin, Ethereum, or other digital assets knows the extreme price swings -- and many have suffered painful losses during the so-called crypto winter. But what many investors do not realize: Under certain conditions, these losses can be claimed for tax purposes and significantly reduce the tax burden.
This article explains the tax law foundations of cryptocurrency taxation in Germany, shows how losses are correctly accounted for in tax returns, and examines current developments in staking, DeFi, and NFTs.
Foundation: The BMF Circular on Taxation of Crypto Assets
On May 10, 2022, the Federal Ministry of Finance (Bundesministerium der Finanzen -- BMF) published the long-awaited BMF circular on the income tax treatment of virtual currencies and other tokens. This circular established for the first time a nationally uniform administrative position on the tax treatment of crypto assets.
The updated BMF circular of March 6, 2025 introduced significant additions, particularly regarding:
- Decentralized finance markets (DeFi)
- Tax declaration and cooperation obligations
- Transaction overviews and tax reports
- Record-keeping obligations
The core message of both circulars: Cryptocurrencies are economic assets (Wirtschaftsgüter) in the tax sense. Gains and losses from their disposal are therefore generally subject to income tax.
Section 23 EStG: Private Disposal Transactions as the Tax Norm
The central provision for the taxation of cryptocurrencies held as private assets is Section 23(1) sentence 1 no. 2 EStG (Einkommensteuergesetz -- German Income Tax Act). According to this provision, gains from the disposal of other economic assets are taxable if not more than one year has elapsed between acquisition and disposal.
The One-Year Holding Period
The holding period is the central element of crypto taxation:
- Disposal within one year: The gain (or loss) is taxable and is taxed at the personal income tax rate (up to 45% plus solidarity surcharge).
- Disposal after one year: The gain is completely tax-free -- regardless of the amount.
Note the exemption threshold: Since the 2024 tax year, an exemption threshold of EUR 1,000 per calendar year applies for all private disposal transactions combined (previously: EUR 600). If this threshold is exceeded, the entire gain is taxable -- not just the excess amount.
Acquisition and Disposal
Acquisition includes the purchase of crypto assets for euros, foreign currency, or other crypto assets. Disposal includes the exchange into euros, foreign currency, or other crypto assets. Using crypto assets as a means of payment also constitutes a disposal.
The BFH Ruling: Supreme Court Confirmation
The Federal Fiscal Court (Bundesfinanzhof -- BFH) confirmed the taxation of cryptocurrencies in its ruling of February 14, 2023 (IX R 3/22). The key findings:
- Cryptocurrencies are economic assets: Bitcoin, Ethereum, and comparable currency tokens are "other economic assets" within the meaning of Section 23 EStG.
- No enforcement deficit: The BFH denied a structural enforcement deficit (Vollzugsdefizit) in the taxation of crypto assets. The tax authorities are capable of recording and taxing crypto transactions.
- Tax liability on exchanges: The exchange of one cryptocurrency for another (e.g., Bitcoin for Ethereum) also constitutes a taxable disposal.
This ruling has created legal certainty and strengthened the position of the tax administration.
How to Properly Claim Losses
Loss Offsetting Under Section 23(3) EStG
Losses from private disposal transactions involving crypto assets can only be offset against gains from private disposal transactions -- not against other types of income such as salary or rental income. This is a limited loss offsetting arrangement.
Loss carryforward: Unabsorbed losses can be carried back to the prior year or carried forward to future years. The loss carryforward is unlimited in time and is automatically determined by the tax office.
Realizing Losses
A loss only becomes tax-relevant when it is realized -- meaning through an actual sale or exchange. A mere price decline without a disposal does not constitute a tax-deductible loss.
Practical tip -- Tax-Loss Harvesting: Investors can deliberately sell crypto assets with unrealized losses within the one-year period to realize tax losses. These losses can then be offset against realized gains. After the sale, the same cryptocurrency can be immediately repurchased -- a "wash-sale rule" as exists in the USA does not currently exist in German tax law.
Documentation Requirements
Particularly important: Proper documentation of all transactions. The updated 2025 BMF circular significantly tightens the requirements for cooperation obligations. The following data should be comprehensively recorded:
- Timestamp of each transaction (purchase, sale, exchange)
- Type and quantity of crypto assets traded
- Exchange rate at the time of the transaction in euros
- Transaction fees
- Wallet addresses and exchange platforms
- Assignment using the FiFo method (First in, First out)
Specialized tax tools such as CoinTracking, Blockpit, or Accointing can significantly facilitate the creation of transaction overviews and tax reports.
Staking and Lending: No Extended Holding Period
One of the most important clarifications in the BMF circular concerns staking and lending. Contrary to earlier concerns:
- The holding period is not extended to ten years through staking or lending. The one-year period remains in effect.
- Staking rewards are taxable as other income (sonstige Einkünfte) under Section 22 no. 3 EStG -- with an exemption threshold of EUR 256 per year.
- Lending income is also subject to taxation as other income.
Staking rewards themselves are taxed at the time of receipt at the then-applicable market value. A new one-year holding period begins for these rewards upon a subsequent sale.
DeFi: New Regulations Since 2025
The updated BMF circular of March 2025 contains for the first time detailed statements on Decentralized Finance (DeFi). On decentralized financial markets, participants interact directly via smart contracts on the blockchain -- without traditional intermediaries.
Tax Classification
- Liquidity mining: Providing liquidity in decentralized protocols can generate taxable income. Contributing tokens to a liquidity pool regularly constitutes a disposal.
- Yield farming: Income from yield farming is generally taxed as other income.
- Token swaps: Exchanging tokens via decentralized exchanges (DEX) is a taxable disposal transaction -- just as on centralized exchanges.
Extended Cooperation Obligations
Particularly for DeFi transactions, the extended cooperation obligation under Section 90(2) AO (Abgabenordnung -- German Fiscal Code) applies. Since no central platform exists that could report data to tax authorities, the burden of proof falls more heavily on the taxpayer.
NFTs: Tax Treatment
Non-Fungible Tokens (NFTs) are treated similarly to other crypto assets for tax purposes. The provisions of Section 23 EStG apply accordingly to the purchase and sale of NFTs:
- Disposal within one year: taxable
- Disposal after one year: tax-free
- The EUR 1,000 exemption threshold also applies here
Special consideration for NFT creation (minting): Minting and the subsequent sale of NFTs may, depending on the scale, be classified as a commercial activity (gewerbliche Tätigkeit), which can trigger trade tax and VAT obligations.
International Outlook: OECD CARF and DAC8
The era of tax anonymity in the crypto space is drawing to a close. Two international frameworks will revolutionize information exchange:
OECD Crypto-Asset Reporting Framework (CARF)
The OECD CARF obligates crypto service providers to automatically report transaction data to tax authorities. 67 countries have committed to implementation. First reports are expected from 2027.
EU Directive DAC8
The EU's DAC8 directive implements CARF within the European framework. From January 1, 2026, crypto service providers in the EU must report their users' transaction data to national tax authorities.
The consequence: Anyone who has not yet declared crypto gains should urgently consider a voluntary disclosure (strafbefreiende Selbstanzeige) before the automatic information exchange takes effect.
Practical Tips for Tax Filing
- Document all transactions: Use specialized crypto tax tools for comprehensive recording of all purchases, sales, exchanges, and rewards
- Apply the FiFo method: The BMF generally prescribes the First-in-First-out method. Document the allocation carefully
- Monitor holding periods: Maintain an overview of which holdings have already exceeded the one-year period
- Realize losses: Consider tax-loss harvesting before year-end to make tax losses usable
- Record staking rewards separately: Document the time of receipt and the respective market value
- Don't forget DeFi transactions: Liquidity mining, yield farming, and token swaps via DEX are also taxable
- Complete Anlage SO: Private disposal transactions with crypto assets are declared in Anlage SO (appendix for other income) of the income tax return
- Seek advice early: The complexity of crypto taxation often requires expert tax advice
Conclusion: Documentation Is Key
The taxation of cryptocurrencies in Germany is complex but also offers planning opportunities -- particularly regarding loss offsetting. The key lies in comprehensive documentation of all transactions and forward-looking tax planning. With the tightened information exchange through CARF and DAC8, transparency is becoming mandatory. Those who put their crypto tax situation in order now will avoid future problems with the tax authorities.
At compleneo, we support you with the tax treatment of your crypto investments -- from loss offsetting and tax returns to strategic tax planning. Get in touch with us.
